38444 Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices

5 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2The Commission has modified the text of the

summaries prepared by DTC.

3Pledgee accounts will continue to be available

at DTC.

4The procedures for DTC shared control accounts

are attached as Exhibit 2 to DTC’s proposed rule

change (File No. SR–DTC–98–5) which is available

for inspection and copying at the Commission’s

Public Reference Room or through DTC.

5 15 U.S.C. 78q–1(b)(3)(F).

6 15 U.S.C. 78q–1(b)(3)(F).

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submissions, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–CHX–98–13 and should be

submitted by August 8, 1998.

For the Commission, by the Division of

Market Regulations, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–18906 Filed 7–15–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40191; File No. SR–DTC–

98–5]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing and Order Granting Accelerated

Approval of a Proposed Rule Change

Relating to Shared Control Accounts

July 10, 1998.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

April 7, 1998, The Depository Trust

Company (‘‘DTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I and II,

below, which items have been prepared

primarily by DTC. The Commission is

publishing this notice and order to

solicit comments from interested

persons and to grant accelerated

approval of the proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The purpose of the proposed rule

change is to allow DTC to make shared

control accounts available to its

participants.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DTC included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. DTC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

New York State recently enacted

revised Article 8 of the Uniform

Commercial Code (‘‘UCC’’). Revised

Article 8 gives priority in certain

situations to a pledgee that has control

over pledged securities (or other

financial assets). According to DTC, a

pledgee has control over securities

when it has the ability to have the

securities sold or transferred without

further consent by the pledgor. The

control of the pledgee need not be

exclusive. The pledgor can retain the

right to redeliver or make substitutions

for the pledged securities.

Currently, when a participant pledges

securities to the pledgee account of a

pledgee at DTC, the securities are under

the sole control of the pledgee.

Therefore, only the pledgee can

redeliver or release the securities.

The purpose of the proposed rule

change is to make shared control

accounts available at DTC as an

alternative to the use of pledgee

accounts.3 As a result of the rule

change, a DTC participant will be able

to establish a shared control account

and to designate any DTC pledgee as the

pledgee for the shared control account.

A pledgee will have control over

securities delivered by a participant to

the participant’s shared control account

at DTC because the pledgee will have

the ability to redeliver the securities

without further consent by the

participant. However, the participant

also will have the ability to redeliver or

to make substitutions for the securities

without obtaining the pledgee’s release

of the securities. DTC states that, except

as modified by the procedures for DTC

shared control accounts,4 the operation

of a shared control account will be

identical to the operation of a DTC

pledgee account and all DTC procedures

applicable to pledgee accounts are

applicable to shared control accounts.

DTC believes that the proposed rule

change is consistent with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder because it is consistent with

DTC’s obligation to safeguard securities

and funds in its custody or control or for

which it is responsible.5

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC does not believe that the

proposed rule change will impact or

impose a burden on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

The proposed rule change was

developed through discussions with

several participants. No written

comments have been solicited or

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Section 17A(b)(3) of the Act requires

that the rules of a clearing agency be

consistent with its obligation to

safeguard securities and funds in its

custody or control or for which it is

responsible.6 The Commission believes

that the rule change is consistent with

this obligation because the proposal

should help facilitate the processing of

secured transactions through DTC’s

facilities. In addition, the operation of

shared control accounts will be

essentially identical to the operation of

pledgee accounts which are currently

available at DTC. Therefore, DTC’s

experience in the operation of pledgee

accounts will help enable DTC to

operate shared control accounts in a safe

and efficient manner.

DTC has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after

publication of the notice of this filing.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after

publication of the notice because
Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices 38445

7The staff of the Board of Governors of the

Federal Reserve System has concurred with the

Commission’s granting of accelerated approval.

Telephone conversation between Kristen Wells,

Senior Analyst, Division of Reserve Bank

Operations, Board of Governors of the Federal

Reserve System, and Jeffrey Mooney, Special

Counsel, Division of Market Regulation,

Commission (July 9, 1998).

8 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1).

2Currently, the Cedel Bank, Societe anonyme and

the Euroclear system, which is operated by the

Brussels Office of Morgan Guaranty Trust Company

of New York, are the only qualified securities

depositories.

3This approach is similar to that taken with

respect to fail obligations relating to warrants, as set

forth in Rule 8, Sections 7(f) and 8(f).

accelerated approval will permit DTC to

immediately make shared control

accounts available to its participants

and to make its procedures reflect

revised Article 8 as recently enacted by

the State of New York.7

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. § 552, will be

available for inspection and copying in

the Commission’s Public Reference

Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to File No. SR–DTC–98–5 and

should be submitted by August 6, 1998.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act, that the

proposed rule change (File No. SR–

DTC–98–5) be and hereby is approved

on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–18963 Filed 7–15–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40190; International Series

Release No. 1145; File No. SR–EMCC–98–

5]

Self-Regulatory Organizations;

Emerging Markets Clearing

Corporation; Notice of Filing and Order

Granting Accelerated Approval of

Proposed Rule Changing Relating to

Warrant Processing

July 10, 1998.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby give that on

May 28, 1998, the Emerging Markets

Clearing Corporation (‘‘EMCC’’) filed

with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I and II below, which items have

been prepared primarily by EMCC. The

Commission is publishing this notice

and order to solicit comments from

interested persons and to grant

accelerated approval of the proposed

rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposal Rule Change

The purpose of the proposed rule

change is to provide a mechanism

whereby EMCC may process cash

payments made with respect to warrants

for which there are outstanding fail

receive and deliver obligations and to

permit EMCC to pair-off outstanding

warrant fail receive obligations with fail

deliver obligations.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

EMCC included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposal

rule change. The text of these statements

may be examined at the places specified

in Item IV below. EMCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

From time to time, issuers of warrants

may declare a money distribution on

their warrants (‘‘warrant payment’’). If

EMCC is notified that a warrant

payment has been declared by a warrant

issuer, those members with a fail deliver

or fail receive obligation relating to such

warrant will receive a report from

EMCC. The report will specify the

amount each member is obligated to

pay/receive. EMCC will also instruct the

qualified securities depository 2 of each

such member to appropriately debit

and/or credit each member’s account on

payable date with the amount(s)

specified on the report. (Fail deliver

obligations will result in debits, and fail

receive obligations will result in

credits.)

EMCC will not guarantee warrant

payments. EMCC’s willingness to pay

members with fail receive obligations is

contingent on its ability to collect these

amounts from members with fail deliver

obligations. If a member with a fail

deliver obligation does not pay EMCC

the cash owed with respect to a warrant

payment, the proposed rule change (i)

permits EMCC to reverse the payment

made to the member with the fail

receive obligations that was the original

counterparty to the transaction

underlying such fail deliver obligation

and (ii) obligates the member with the

fail deliver obligation that did not pay

EMCC such monies owed, to

compensate EMCC for such nonpayment.

The proposed rule change also

provides that the member with the fail

receive obligation will be entitled to

compensation for its late receipt of the

warrant payment if EMCC collects from

the member with the fail deliver

obligation that failed to make timely

payment. The proposed rule change

provides that if a member with a fail

receive obligation does not receive a

warrant payment or if such a warrant

payment is reverse and, EMCC has

ceased to act for the member with the

fail deliver obligation, the member with

the fail receive obligation may request

that EMCC file a claim for the payment

with the estate of the member with the

fail deliver obligation. Any such action

shall be taken at the sole cost and

expense of the member with the fail

receive obligation.3

EMCC states that, historically, fail

rates with respect to warrant

transactions are high. Firms would

periodically employ a process by which

they bilaterally paired-off outstanding

warrant receive and deliver obligations